August 2021 – First month (ever) of trading

Performance

US
NDX100 MOMO: +5.8%
MR: -3.5%

ASX
WTT: +6.0%

Thoughts

I am thrilled with my first month of trading. First, I want to thank Nick, Craig and everyone who share their thoughts, experience and expertise on this forum. It is great to be a member of this community.

Why I started with three strategies and how I chose them

I believe that diversification is the only free lunch in trading, so even though I have a tiny account, I decided to start trading with at least three strategies from the get-go. The three strategies trade different ideas (long term breakout, long term momentum and multi-day mean reversion), and they trade different markets (US and AU) and universes (Russell 1000, NDX100 and ASX All Ordinaries).

I have my MOC Long and MOC Short strategies backtested and ready to go, but I lack the leverage and technology to go live with them at the moment (more on this later).

The ten-year equity curves of the five strategies I want to trade versus an equal weighted portfolio of the 5 strategies are below. The results should be taken with a grain of salt because it assumes equal rebalancing of the five strategies every week. My account size and current technology do not allow me to rebalance weekly, but it is something I will work on in the future. It does, however, clearly show the benefits of diversification. Each of the individual strategies were developed and tested, so they work in their own right. In other words, they have positive expectancy; the only thing left to do is to take as big a bite from that free lunch as I possibly can by diversifying.

The table below shows the annualised volatility, annualised return and sharpe of the strategies and the portfolio

Strategy specific thoughts and observations

ASX All Ords WTT
The strategy has 19 open positions. I am comfortable executing it.

NDX100 MOMO
Strategy performed well in August. I am comfortable executing it.

Russell 1000 MR
The most annoying thing about this strategy is the commission I have to pay on Interactive Brokers to trade it. I have a small account size, so it really hurts. Paying $1 to buy and then $1 again to sell is not sustainable. 35% of my total loss for this strategy in August was commission paid to Interactive Brokers. Maybe this won’t be such a big problem if there is more volatility in the market? I will probably trade this strategy on IB for another month or two while I build the technology to trade on the commission-free platform Alpaca. Once the technology is developed, I’ll trade this strategy on paper at Alpaca for a month or so in parallel to IB to see what my fills are like and whether Alpaca will be a viable solution. Does anyone in the forum use Alpaca?

I’ve seen several trades on this strategy where the trade was profitable at the open at some point and then ultimately sold off and exited at a loss. I wonder if anyone here has tried exiting MR systems at the first open that the trade is profitable. This level of trading would require a step up in technology as I’d need some automated way of exiting if the open is profitable.

Russell 1000 MOC Long
I only paper trade this strategy at the moment.

One of the nasty surprises I got was that I couldn’t get 4x Pattern Day Trading leverage at IB because I am an Australian – BUMMER. I found a 0 commission brokerage named Alpaca that (I think) will give me the leverage I require. I’ve developed Python code using their API and have successfully paper traded this strategy for the last week or so. Development is extremely slow because it is a day trading strategy that reveals coding bugs while the US markets are open and I am asleep. Every time I fix a bug, I have to wait 24 hours and sometimes a weekend to see if my bug is fixed. It feels like I’m developing code on a punch card and waiting for the mainframe to spit out the answer like it is 1970 or something. The biggest worry here is whether I will get good fills with this broker when live trading. If this doesn’t work, then I’ll have to try the same approach at Tradestation.

Russell 1000 MOC Short
Similar development stage and problems as MOC Long. I’m somewhat concerned about the fact that Nick has stopped trading this strategy due to backtest results substantially differing from live trading results.

That is it for my first month of trading. It was a steep and enjoyable learning curve and I am looking forward to read how everyone else performed this month.

Happy trading everyone!!